Despite grumblings, USA refrains from labeling China a "currency manipulator"

21 October, 2018, 06:39 | Author: Regina Silva
  • US raises concerns over China`s lack of currency transparency

In putting Beijing and five other US trading partners on notice, the US Treasury once more refrained from escalating a fight over China's currency as US President Donald Trump had once pledged to do on the campaign trail. The dollar index, which measures its value against six major peers, last traded at 95.703, little changed on the day, after rising to a fresh one week-high earlier in the day.

The decision comes amid an escalating trade conflict with China that could ultimately result in US tariffs on all Chinese exports before it is resolved.

The yuan, also known as the renminbi, or "people's money", has declined by nearly 10 percent against the dollar since April as China's economic growth cooled and US and Chinese interest rates went in opposite directions.

The Treasury also said it has was keeping China, India, Japan, Germany, South Korea and Switzerland on a monitoring list for extra scrutiny.

The yuan has edged near 6.93, a level where it also was trading in August.

The Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States concluded that while the currency practices of six countries "require close attention", no major U.S. trading partner now met the 2015 legislative criteria for enhanced analysis.

Major currencies have shown limited reaction after the USA government late on Wednesday refrained from naming China as a currency manipulator.

Chandler said China does not meet all of the criteria to be called a currency manipulator.

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At around 2pm, Singapore time, the Chinese Yuan was at 6.94 against the United States dollar, edging closer to the psychological barrier price of 7 per dollar. The increased foreign holdings come ahead of the anticipated inclusion of Chinese government and policy-bank bonds in global bond market indices from next April.

"We will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions", Yi said at a meeting of the International Monetary and Financial Committee.

The minutes from the Fed's September 25-26 meeting showed every Fed policymaker backed raising interest rates last month and also generally agreed borrowing costs were set to rise further, despite U.S. President Donald Trump's view that the tightenings have already gone too far.

Mnuchin has said since July that Treasury is concerned about the yuan's recent drop. However, US Treasury Secretary Steven Mnuchin has sent out a warning about the lack of Chinese transparency and the relative weakness of their currency.

He says China is the biggest trading partner for the USA that doesn't have a free market based economy. China, he said, had a surplus this year and has been attempting to prevent its currency from weakening.

But some say the central bank, confident it can control any side effects, might allow the market to carry the yuan gradually lower.

"With the worldwide environment being complicated and volatile, downward pressure on China's economy has increased, but we are determined, and we are able, to cope with risks and challenges", state radio reported Premier Li Keqiang saying in a speech on Tuesday in the Netherlands.

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